Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 70,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

7. In 2019, Taxpayer (“T”) is a single, 65 year-old individual who is a U.S. citizen. T turned 65 in 2019. T receives $18,000 of social security income in 2019 (the first year T received Social Security Benefits). Also, T received $6,000 of interest income from a municipal bond in both 2018 and 2019. On June 1, 2018, T took a job with a multi-national corporation which paid T $5,000 per month. As a condition of the job, T is required to work overseas, in the country of Austria, and T did in fact work in Austria for 214 days (From June 1 – December 31) in 2018. T is offered to continue to work (still in Austria and still for $5,000 per month) for seven additional months (from January 1 until the end of July, which is 211 days) in 2019, at which point T’s position would terminate. T is trying to decide whether T wants to continue to work for seven months in 2019 or quit on January 1. (These are T’s only transactions during 2018 and 2019).

a. What is T’s Gross Income in 2019 if T continues to work through July of 2019? __________________________________

b. What is T’s Gross Income in 2019 if T does NOT continue to work in 2019? __________________________________

c. Excluding the effects of the payroll tax and any credits, What is the economic benefit to T of continuing to work for 7 months in 2019 (meaning how much total extra money, after tax, will T have as a result of continuing to work in 2019)? _____________________

Please read carefully what is required and answer all the sections. if you cannot solve, leave to someone who can.Thanks.

You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones. Bob, age 60 and single, has recently retired from IBM. He has $690,000 available in his 401(k) fund and he is thinking of using that money to open a used car business that will be located at 210 Ocean View Drive in Pensacola, Florida. Bob has estimated that the business might make $300,000 in taxable income. Bob’s personal wealth including investments in land, stocks, and bonds is about $14,000,000. He reported an interest income of $20,000 and dividend income of $6,000 last year. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000. He is also considering transferring a possible 40% interest in his new business to his daughter Mandy, age 23 and single.

Required:

A. Prepare a detailed calculation of the capital gain and income tax supported and explained with authority from the tax code. Use the Capital Gains Tax Worksheet to calculate Bob's income tax. I am looking for a step by step calculation and explanation of the long term capital gain, income tax, and after-tax proceeds from the sale of Bob's land.  Also, please note the long term capital gains tax rate is 20% and there is a 3.8% tax on net investment income that applies.

B. Identify the tax consequences on the sale or exchange of the land consistent with capital gain rules. Consider the selling expense, broker’s fees, closing costs, appraisals, and surveys and the correct schedule form to complete.

C. Describe the after tax effects on the client’s cash flow based on the sale of the land that is needed to provide the funds necessary to start the business. Consider including capital gains tax rules.

D. Explain whether or not the client and his child should take a salary or cash distribution according to tax purposes and Internal Revenue Code and Treasury regulations. Consider the type of business which is an S Corporation and the tax effect whether it is salary, dividends, or cash withdrawal. Looking for a summary discussion of the income tax consequences to Bob and to his business of taking a salary vs. a cash distribution

Question 2 REQUIRED:

(1) Complete the following partial worksheet.

2. (2) Using your worksheet information, prepare closing entries (for December 31 of the current year) in the journal paper on the next page. Note: Explanations are NOT required.

3. (3) Assuming the journal entries prepared in part (2) have been posted, prepare a Post-Closing Trial Balance (on the next page). Hint: you may find it helpful to use a T-account for calculating Capital.

account titles adjusted trial balance    income statement statement of changes in equity or balance sheet

Assume you are starting a new business involving the manufacture and sale of a new product. Raw materials costs are $45 per product. Direct labor costs are expected to be $25 per product, Manufacturing Overhead is expected to cost $18 per product. You expect to sell each product for $172. You plan to produce 120 products next month and expect to sell 85 products. During the second month, you plan to produce 120 products but expect sales in the month to be 110 products. During the third month you expect to produce 120 products but sell 135 products Prepare a production schedule (units & dollars), a raw materials and finished goods inventory schedule (units & dollars), and the top part of an income statement (sales, cost of goods sold and gross profit) for the three months.

Please make a way to answer all the questions. I cannot separate the questions anymore because I only have 1 question left to post here on Chegg, so please be considerate. Thank youu!

21. Which of the following statements is true of treasury stock?

a.It usually has a debit balance.

b.It is classified as an asset on the balance sheet.

c.It is considered outstanding stock.

d.It allows management to vote for members of the board of directors.

22. When common stock is issued in exchange for a noncash asset and the market value of the stock cannot be determined, the acquired asset should usually be recorded at an amount equal to the

a.book value of the noncash asset.

b.fair value of the noncash asset.

c.undepreciated cost of the noncash asset.

d.book value of the stock.

23. If treasury stock is sold for less than its cost, and there were no previous treasury stock sales, the difference between the sales price and cost is debited to

a.paid-In capital, treasury stock.

b.paid-in capital in excess of par.

c.retained earnings.

d.common stock.

24. Treasury stock is classified on the balance sheet as what type of account?

a.Current asset

b.Contributed capital

c.Long-term investment

d.Contra-equity

25. A loss on the sale of treasury stock is recognized when treasury stock is sold at

a.a higher price than the stock's market value.

b.a higher price than the stock's cost.

c.a higher price than the stock's par or stated value.

d.None of these are correct.

26. Treasury stock is stock that is

a.issued and outstanding.

b.authorized and outstanding.

c.issued but not outstanding.

d.authorized but not issued.

27. A Paid-In Capital account can be credited with all of the following transactions EXCEPT

a.the issuance of no-par stock with a stated value.

b.the purchase of treasury stock.

c.the issuance of par stock issued at a price greater than par value.

d.the reissuance of treasury stock.

28. When common stock is issued in exchange for a noncash asset and the market value of the stock is determinable, the acquired asset should usually be recorded at an amount equal to

a.the market value of the stock.

b.the par value of the stock.

c.the book value of the noncash asset.

d.the fair value of the noncash asset.

29. Which of the following is NOT true regarding "legal capital"?

a.The dollar amount of legal capital is established by federal statutes.

b.It is intended as a means to protect a company's creditors.

c.It is intended to prevent corporations from paying excessive dividends.

d.It represents an amount that cannot be returned to the owners so long as the corporation exists.

30. Compared with preferred stock, common stock usually has a favorable preference in terms of

a.dividends.

b.resale value.

c.voting rights.

d.liquidated assets.

31. Which of the basic stockholder rights do preferred stockholders normally give up?

a.The right to vote.

b.The right to receive dividends when they are declared.

c.The right to excess assets after creditor claims are satisfied.

d.All of the above.

32. Which of the following is a basic right of a preferred stockholder?

a.The preemptive right.

b.The right to receive a dividend.

c.The right to vote for the board of directors.

d.All of these.

33. The investors in a corporation are called

a.board of directors.

b.corporate owners.

c.stockholders.

d.management.

34. Which of the following is NOT a basic right of a common stockholder?

a.The right to receive a dividend.

b.The preemptive right.

c.The right to vote for the board of directors.

d.All of these are basic rights of a common stockholder.

35. Which type of business organization is characterized by limited liability?

a.Proprietorship

b.Partnership

c.Corporation

d.Corporation, proprietorship, and partnership

36. Which of the following is NOT true of a corporation?

a.A corporation has the ability to raise large amounts of capital.

b.The owners of a corporation have unlimited liability.

c.A corporation has easy transferability of ownership.

d.A corporation is taxed separately from its owners.

37. The right of current stockholders to purchase additional shares in order to maintain the same percentage ownership of new shares is called

a.the voting rights privilege.

b.preemptive right.

c.liquidation.

d.the cumulative preference.

The

Ridgefield

Company manufactures​ trendy, high-quality moderately priced watches. As

Ridgefield​'s

senior financial​ analyst, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare

Ridgefield​'s

2017

income statement. The following data are for the year ended December​ 31,

2017​:

Beginning inventory, January 1, 2017

83,000 units

Ending inventory, December 31, 2017

34,500 units

2017 sales

424,000 units

Selling price (to distributor)

$23.50 per unit

Variable manufacturing cost per unit, including direct materials

$4.80 per unit

Variable operating (marketing) cost per unit sold

$1.30 per unit sold

Fixed manufacturing costs

$1,766,400

Denominator-level machine-hours

6,400

Standard production rate

60 units per machine-hour

Fixed operating (marketing) costs

$1,040,000

Assume standard costs per unit are the same for units in beginning inventory and units produced during the year.​ Also, assume no​ price, spending, or efficiency variances. Any​ production-volume variance is written off to cost of goods sold in the month in which it occurs.

Requirements

During 2018 the following occurred:

• Land costing $300,000 was purchased in 2018 for $220,000 cash and by issuing common shares of $80,000
• A building that had an original cost of $348,000 and accumulated depreciation of $128,000 was sold for a loss of $53,000
• A vehicle was sold during the year, the vehicle had a cost of $21,000, accumulated depreciation of $3,000 and was sold for $6,800 in cash
• The vehicle that was purchased in 2018 was purchased by obtaining a bank loan
• $137,0000 was paid towards the bank loan in 2018
• The company declared dividends of $32,000 in 2018
• Common shares were bought back by the company during 2018

1. Prepare the statement of cash flows for 2018 using the indirect method.

For each of the three independent situations below determine the amount of the annual lease payments. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Determine the annual lease payments for each situation: (Round your intermediate and final answers to the nearest whole dollar amount.)

27. Two major sub-sections appearing in the paid-in capital section of the balance sheet are

Select one:

a. preferred stock and common stock.

b. capital stock and treasury stock.

c. capital stock and additional paid-in capital.

d. paid-in capital and retained earnings.

30. On January 1, Borge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market rate of interest for these bonds is 9%. Interest is payable annually on December 31. Borge uses the effective-interest method of amortizing bond discount. At the end of the first year, Borge should report unamortized bond discount of

Select one:

a. $153,000.

b. $169,470.

c. $163,547.

d. $164,700.

e. $157,647.

31. Each of the following decreases retained earnings except

Select one:

a. All of the provided responses decrease retained earnings.

b. a cash dividend.

c. a stock dividend.

d. a liquidating dividend.

33. Garland Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2016. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Garland uses the straight-line method of amortization.

What is the carrying value of the bonds on January 1, 2018?

Select one:

a. $190,400

b. $197,350

c. $189,200

d. $200,000

e. $188,454

20. Following are balance sheet amounts for Carolina Company as of 12/31/17:

Preferred Stock                                                              $    200,000

Common Stock                                                                     300,000                       

Paid-In Capital in Excess of Par - Preferred                     200,000

Paid-In Capital in Excess of Par - Common                      400,000

Retained Earnings                                                          500,000

Treasury Stock                                                                100,000

Paid In Capital from Treasury Stock                                    50,000

Given the above what is total paid in capital?

Select one:

a. $1,150,000

b. $1,100,000

c. $1,000,000

d. $   600,000

e. $   650,000

21. A corporation issued $600,000, 10%, 5-year bonds on January 1, 2017 for $648,666, which reflects an effective-interest rate of 7%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the carrying value of the bonds on January 1, 2019 is

Select one:

a. $617,911

b. $629,198.

c. $626,001.

d. $638,932.

e. $633,817.

24. The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

Select one:

a. increase total liabilities and decrease total assets.

b. decrease total liabilities and stockholders' equity.

c. increase total expenses and total liabilities.

d. decrease total assets and stockholders' equity.

e. increase total assets and stockholders' equity.

26. The following selected amounts are available for Vizio Company:

Retained earnings (beginning)                                                                                 $1,600

Net loss                                                                                                                             300

Write off of uncollectible receivable (to allowance for doubtful accounts)             200                                             

Inventory overstatement from prior period (net of tax)                                            500

Cash dividends declared                                                                                                 200

Stock dividends declared                                                                                    200

Based upon the above information, what is Vizio's ending retained earnings balance?

Select one:

a. $   200

b. $1,400

c. $1,200

d. $   400

e. $1,800

Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity shown as follows. Complete Outdoor Outfitters's flexible budget at the 105,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.

Cybernetronics Inc. (Cyber) is a Canadian-owned public company which designs and manufactures communications and control systems. The company's year end is May 31. It is now June 2018.

You, CPA, are the manager for the audit of Cyber and yesterday had met with the treasurer to discuss the year-end audit. The partner responsible for this client has asked you to prepare a report for the client which discusses important financial accounting issues and a memo to him regarding the audit issues you believe are important.

Notes from the Meeting with the Treasurer

1.          In December 2017, Cyber won a $40 million contract to design autonomous robots for use in mining activities. In April 2018, the customer exercised the cancellation clause included in the contract. Cyber has capitalized design and development costs related to this contract. The cancellation clause requires the mining company to pay a penalty of $12 million. The penalty has not yet been paid to Cyber.

In June 2017, Cyber entered into an agreement with a university whereby Cyber received assistance in the development of fuzzy logic software which was to have been used in the robots designed for the contract with the mining company. The agreement requires Cyber to make an annual contribution of $0.5 million to the university for four years. The first payment of $0.5 million was made in March 2018 when the university's work was completed.

Management of Cyber is confident that the technology developed, including the fuzzy logic software, can be applied to future contracts involving the design of robots.

Cyber entered into a five-year lease on June 1, 2017 for facilities dedicated to the design and future manufacture of the robots for the mining company. Management of Cyber is presently negotiating a buy-out of the lease and has offered to make lump-sum payment of $750,000 to the lessor on September 1, 2018. The annual lease payment is $500,000.

The draft balance sheet prepared for Cyber's May 31 year end included capitalized design and development costs in the amount of $8.2 million. This amount includes the $0.5 million paid to the university. The draft income statement includes the $12 million cancellation penalty as 'other income -- gain on cancellation of contract'.

*Identify the accounting and auditing issues*

Flexible Budget

In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 400,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items:

Required:

1. Prepare an overhead budget for the expected activity level for the coming year.

2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products).

Prepare an overhead budget for production that is 20 percent lower than expected.